Financial Derivatives Company analysts have forecast a moderation in Nigeria’s inflation rate for July, projecting a decline to 21.34 per cent from June’s 22.22 per cent, ahead of the National Bureau of Statistics Consumer Price Index release on Friday.
The anticipated easing is attributed to the onset of the harvest season and base-year effects, with month-on-month inflation expected to drop by 0.08 percentage points to 1.60 per cent (annualized at 20.77 per cent).
In an emailed note, the analysts highlighted significant price declines in key food items during July, driven by improved supply as the harvest period commenced. “With the commencement of the harvest season, we anticipate a further decline in commodity prices in the coming months.
During our survey in July, we noticed that the prices of most essential commodities declined – tomatoes by 31.82 per cent, yams by 18.18 per cent, onions by 21.43 per cent, peppers by 11.11 per cent, turkey by 11.76 per cent, palm oil by 4.17 per cent, beans by 3.53 per cent, and garri by 3.03 per cent,” the report stated.
The analysts noted price stability for 68.57% of surveyed items, including rice, wheat flour, semovita, eggs, and vegetable oil, with import-dependent staples like Titus fish and basmati rice also maintaining steady prices. Exchange rate stability across market segments, supported by Central Bank of Nigeria interventions, saw the naira hold around ₦1,530/$ in both official and parallel markets.
Additional factors contributing to the inflation moderation included a 2% drop in diesel prices to ₦1,050 per liter, reducing logistics costs. “Due to decreased food prices, reduced PMS prices and logistics costs in July, and the stability of the naira in the forex market, we project year-on-year food inflation to ease to 21.35 per cent, representing a 0.62 percentage point decline from June,” the analysts explained. Monthly food inflation is expected to fall by 0.57 percentage points to 2.68%.
Core inflation (excluding seasonal items) is projected to decline by 0.35 percentage points to 22.41%, with monthly core inflation dropping to 2.26%, supported by forex stability and steady energy prices. However, the report flagged persistent security challenges in food-producing states and declining oil prices as key risks to the outlook. Potential naira depreciation pressures were also noted, driven by seasonal demand for forex for international tuition payments and Christmas inventory buildup by traders.
